Generation Debt:
Erasing Student Loans and Debt
Guy Kendall-Freas
NEA Member Benefits
OH/KY/WV Regional Office
1217 Monterey Dr.
Mansfield, OH 44907
888-749-7380
[email protected]
Statistics on Student Loans / Debt
• Only 16% of borrowers (graduates) were debt free aftercompleting a bachelors degree • 51% had a debt of $10,000 or more • 39% paying on debt deferred 4 years later • Student-loan balances rose 16% to an average of
$14,379
• The average student loan balance at graduation is now $29,000.
• Nationally, outstanding student loan debt exceeds $1.2 trillion and predictions are it will get worse as tuition continues to outpace inflation.
• Impacts the economy of the borrower as well as the Nation.
Results of student loan and debt…
• 22% have taken a job they otherwise wouldn't have because they needed more money to pay off student-loan debt• 29% have put off or chosen not to pursue more education because they have so much debt already
• 26% have put off buying a home • 11% have put off marrying • 14% have put off having children
• 19% have moved back with parents to cut costs • The 2010 Census found that more than 25% of 18- to
34-year-olds had moved back in with family (hence the name “Boomerang Generation”)
Skyrocketing Tuition
• The average price of college has grown much
faster than the rate of inflation an average of
6% a year over the past decade.
• Average annual tuition/room & board cost at
public four-year colleges and universities today
is $22,826 - up 444% from 1993.
Declining Student Grants
• Though total federal student aid has grown, so
has the proportion of people in college
•
In 2013, 68.4% of high school graduates
enrolled in college
•
In 1983, only 52% did (only 46% in 1973)
• As a result, student grants cover only about
33% of the costs of a public four-year college
today, compared with nearly 80% in the
mid-1980s and only 14% of costs at a private
four-year college.
Suze Orman says,
• “Remember, this debt was for a truly necessary
and worthwhile cause: your education.”
• A college education gives you nearly double the
earning potential of a high school degree
• High school degree is estimated to translate into
$1.2 million in lifetime earnings
• A bachelor’s degree is estimated to translate
into $2.1 million in lifetime earnings
• Collect a master’s degree and it is estimated to
translate into $2.5 million in lifetime earnings
• IT WAS WORTH IT?in the LONG RUN
The Money Book for the Young, Fabulous, and Broke by Suze Orman
What loans are we talking about?
• As with all things financial, student loans are
highly personal. Thus, you will want to contact
your lender to ensure that you are meeting the
terms of your loan.
• For the purpose of this presentation:
Federal or Stafford LoansFederal Perkins Loans
• The good news:
Depending on your loan type, current teaching
Definitions:
• Subsidized loans: the federal government covered the interest payments for you while you were in school. • Grace period: six months after graduating before having
to pay back student loans
• Deferment: you get to delay payment until a later date (still have to pay it). Your loan will not accrue any interest. • Forbearance: try for this if you are denied a deferment. It is up to the lender to grant the request, however, interest on the loan will continue to accrue.
INTEREST RATE – ALERT!!!!
• Interest rates change each July 1 based on the going ratefor a Treasury bill index, thus your payments may increase or decrease.
Current rate for Stafford is 3.86% for loans disbursed between July 2013 and July 2014. For loans disbursed after July 1, 2014, the rate is 4.66% (up .5% from a year ago)
Current rate for Stafford (graduate/professional) is 5.41% for loans disbursed between July 2013 and July 2014. For loans disbursed after July 1, 2014, the rate is 6.21% (There are no subsidized loans for Graduate and Professional studies)
INTEREST RATE – ALERT!!!!
• Interest rates change each July 1 based on the going ratefor a Treasury bill index, thus your payments may increase or decrease.
Current rate for a Parent Plus Loan is 6.41% for loans disbursed between July 2013 and July 2014. For loans disbursed after July 1, 2014, the rate is 7.21% (up .5% from a year ago)
Additionally, there is now an origination fee of 1.073% for Stafford Loans and a whopping 4.292% for Parent Plus Loans!
Current rate for Perkins is 5% with no origination fee.
RECENT CHANGES TO FEDERAL
STUDENT LOANS
.
New limits on borrowers, annually and
cumulatively.
Annual max for subsidized (undergrad) loan is $8,500 Annual max for unsubsidized (undergrad) loan is $12,500 Annual max for Perkins is $5,500
RECENT CHANGES TO FEDERAL
STUDENT LOANS
.
New limits on borrowers, annually and
cumulatively.
RECENT CHANGES TO FEDERAL
STUDENT LOANS
.
New limits on borrowers, annually and
cumulatively.
The cumulative max which can be borrowed by a dependent undergrad student is $31,000. The cumulative max which can be borrowed by an independent undergrad student is $57,500.
RECENT CHANGES TO FEDERAL
STUDENT LOANS
.
New limits on borrowers, annually and
cumulatively.
The cumulative max which can be borrowed by a dependent undergrad student is $31,000. The cumulative max which can be borrowed by an independent undergrad student is $57,500.
RECENT CHANGES TO FEDERAL
STUDENT LOANS
.
New limits on borrowers, annually and
cumulatively.
The annual max for graduate/professional students is $20,500 and the cumulative max is $138,500!
The annual max for a medical student is $40,500 and the cumulative max is $224,000!!
RECENT CHANGES TO FEDERAL
STUDENT LOANS
. There are more repayment options, including: “Pay As You Earn” through which borrowers pay 10% of their discretionary income to borrowers of loans before 2007 and those who have not borrowed since 2011.
Borrowers cannot be in default.
Repayment for 10 years if employed in public sector or not-for-profits and 20 years if employed in private sector. Remaining balance is then forgiven if borrower has made timely, regular payments.
So where do I start to see if my loan
can be forgiven?
• Locate your paperwork:
National Student Clearinghouse loan locator:
www.studentclearinghouse.org. • Click on Students & Alumni National Student Loan Data System:
http://www.nslds.ed.gov/
Teacher Loan Forgiveness Program
* Stafford Loan
• General Requirements:
Receive a Stafford Loan through the Federal Family Education Loan (FFEL) Program
You have been employed for at least five consecutive years in an elementary or secondary school designated as a low-income school
You are not in default on the loan for which you are seeking forgiveness
You have not received a benefit for the same teaching service through the AmeriCorps Program
You received the loan for which you are requesting forgiveness before the end of your fifth year of qualifying teaching
Teacher Loan Forgiveness Program
* Stafford Loan
• How do I find out if my school is designated as a
low-income school?
Call 1-800-4-FED-AID www.studentaid.ed.gov
• Repaying
• Cancellation and Deferment Options For Teachers • Cancellation for Stafford Loans
https://www.tcli.ed.gov/CBSWebApp/tcli/TCLIPub SchoolSearch.jsp
• State • Year • School Name
• Location (or School District) • Search
• DO THIS FOR FIVE CONSECUTIVE YEARS TO SEE IF YOUR SCHOOL QUALIFIES
Forgiveness Amount
* Stafford Loan
• You may receive up to $17,500 in loan forgiveness if you are:
“Highly qualified” full-time mathematics or science teacher in a secondary school
“Highly qualified” special education teacher • You may receive up to $5,000 in loan forgiveness if:
Your five years of qualifying teaching service began after October 30,2004 and you were:
• A full time elementary teacher who demonstrated knowledge and teaching skills in reading, writing, mathematics, and other areas of the elementary school curriculum
• A full time secondary teacher who taught in a subject area relevant to your academic major
How do I apply for Loan Forgiveness?
* Stafford Loan
• Must complete a Teacher Loan Forgiveness
Application and return it to the holder(s) of the
loan(s) for which you are requesting
forgiveness
• The Administrator where you performed your
qualifying teaching service must certify on the
application that your teaching service met the
requirements for loan forgiveness for all five
years
• Form available on-line:
http://www.ifap.ed.gov/dpcletters/attachments/G
EN0502Attach2.pdf
Teacher Loan Forgiveness Program
* Perkins
• You qualify for cancellation:
if you have served full time in a public or nonprofit elementary or secondary school system as a:
• teacher in a school serving students from low-income families; or
• special-education teacher, including teachers of infants, toddlers, children, or youth with disabilities; or
• teacher in the fields of mathematics, science, foreign languages, or bilingual education, or in any other field of expertise determined by a state education agency to have a shortage of qualified teachers in that state.
Teacher Loan Forgiveness Program
* Perkins
• Teaching in a Low-Income School
May be granted only if you taught in an eligible school as determined by the state education agency https://www.tcli.ed.gov/CBSWebApp/tcli/TCLIPubSch
oolSearch.jsp
• State • Year • School Name
• Location (or School District) • Search
• DO THIS FOR FIVE CONSECUTIVE YEARS TO SEE IF YOUR SCHOOL QUALIFIES
Teacher Loan Forgiveness Program
* Perkins
• Teaching in a designated subject shortage area
Each year the state education agency determinesany subject shortage areas in the elementary and secondary schools within the state
Listing of state teacher shortage areas:
Teacher Loan Forgiveness Program:
* Perkins
• How do I apply for teacher cancellation?
Request the paperwork from the office that administers the Federal Perkins Loan program at the school that holds your loan
You must also provide any documentation the school requests to show that you qualify for cancellation • Cancellation amounts for years of service
If a borrower is eligible for teacher cancellation under any of the categories listed above, up to 100 percent of the loan may be canceled for teaching service, in the following increments:
• 15 percent canceled per year for the first and second years of service,
• 20 percent canceled for the third and fourth years, and • 30 percent canceled for the fifth year.
• Each amount canceled per year includes the interest that accrued during the year.
Should I consolidate?
• This varies from person to person based on your individual loan and what works best for your personal financial situation
• Advantages:
Get around the stress of July 1 when the interest rate changes
If you consolidate during your grace period you may qualify for a lower fixed interest rate
• Disadvantages:
You may not be eligible for deferment or forbearance Consolidation is a one time deal, not like a mortgage
where you can refinance often.
***YOU MAY JEOPARDIZE YOUR ABILITY TO
APPLY FOR COMPLETE FORGIVENESS IF YOU ARE A TEACHER***
Should I consolidate?
• “I just got married, and both my spouse and I
have student loans. Should we pay them
separately or consolidate all of our debt?”
Hope for the best, plan for the worst • Death or divorce
• Source: Suze Orman, The Money Book for the Young, Fabulous, and Broke pg. 130-131 (Actual example of a married couple, both of whom are teachers)
Student Loan Interest Deduction
So how can NEA Member Benefits
help me?
• Web-site:
www.neamb.com
o Hundreds of consumer articles, resources, calculators, and advice
o Information about the many programs and services available exclusively to members and their families.
oNEA Smart Option Student Loan oNEA/NFCC partnership oNEA Academy oAnd so much more!!!
So how can NEA Member Benefits
help me?
• NEA Member Service Center
o 1-800-637-4636o Monday - Friday, 8 a.m. to 8 p.m. ( Saturday, 9 a.m. to 1 p.m. ) ET
So how can NEA Member Benefits
help me?
• NEA Member Assistance Program
o NEA’s many great business partners can provide relief formembers impacted by layoff, natural disasters, etc.
